Absa says a dividend is unlikely


Absa says a dividend is unlikely

Published Date: 2020-11-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

Absa says a dividend is unlikely

Although many of its performance metrics are improving, the bank says it is focused on preserving capital.

Absa says it probably won't pay a dividend this year as it preserves capital in the face of a sharp decline in earnings and rising credit impairments. However, after a tough first half, it says many of its metrics improved in the third quarter of the year.

In a trading statement, the banking group said despite an improvement in credit impairments for the three months ended September, impairments for the first nine months of the year were still triple those reported for the same period last year. Its credit loss ratio reduced to 219 basis points from 277 basis points in June.

Revenue growth for the nine months ended September was similar to the 3% it recorded for the first six months of the year, with net interest income continuing in line with the 6% reported at the half-way stage. Non-interest income improved slightly from the 2% first-half decline.

It expects full-year earnings and headline earnings per share to be more than 40% lower than the 1,717.6c and 1,750.1c it reported last year, weighed down by the credit impairments. In the first half of its financial year, impairments were increased to R14.7 billion, with accounting rules requiring banks to make provisions for future potential credit losses.

Its return on equity (ROE) for the first nine months was more than double the first half's 2.6%, as the third quarter ROE improved to low double digits. However, it's still expected to remain well below the cost of equity this year.

The bank didn't pay an interim dividend following guidance from the Reserve Bank for banks to conserve capital due to the potential fallout from Covid-19.

Its shares closed 0.2% higher at R107.27 yesterday.

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